There's a certain kind of movie, of which The Usual Suspects is the exemplar, in which a closing revelation shows everything that we have just seen to be an illusion: the events never happened and all the dialogue meant something else. The publication this week of Peter Mandelson's memoirs – with, appropriately, a film-derived title, The Third Man – had something of this effect on British political journalism.

Like duped movie-goers, we now look back at more than a decade of television, radio and newspaper interviews in which the big Labour players – prominent among them, Baron Mandelson of Foy and Hartlepool himself – insisted that Tony Blair had never agreed a leaving date with Gordon Brown, that reports of a breakdown in the working relationship between PM and chancellor were the fantasy of hacks, that there had never been a plan to force Brown from the Treasury and that, in the runup to the 2010 election, the cabinet was united behind the Labour leader.

The Third Man exposes all these conversations as charades. Blair, it turns out, had indeed agreed to serve only two terms; though not, as journalists had always thought, in an Islington restaurant in 1994, but at a dinner in John Prescott's Admiralty House apartment in 2003. This agreement, on which the premier reneged, followed a period in which Mandy and Blair had been plotting, in "Operation Teddy Bear", to drop the Scot from the Treasury.

Further cursing our credulity, we also now recall that, earlier this year, Mandelson was high among the dampeners dispatched across the airwaves to rubbish Andrew Rawnsley's account, in his book The End of the Party, of Brown as a raging and deranged figure. "John, John," the Lord would sigh with his theatrical exasperation, or "Jeremy, Jeremy", before dismissing tales of Brown's tantrums and tactics as irrelevant waffle.

Now, a few months later, we get from Mandelson's own hand a devastating picture of Blair as an abused premier, cowering from the screams and schemes of his next-door neighbour. Tony, it is now revealed, regarded Gordon as "bad, mad and dangerous", while even John Prescott, a politician of thick skin and fast fists, was apparently "frightened" of the chancellor.

The belief that the public utterances of politicians are an exercise in dissembling is a long one, immortalised in the advice from the late journalist Louis Heren that any conversation with a legislator should be subject to the caveat: "Why is this lying bastard lying to me?" Yet, even so, it is a shock to discover that we were not cynical enough.

If Mandelson's account is accurate – and rival tell-taler Alastair Campbell has already found discrepancies with his own diaries – then thousands of hours of film and air and ink expended on the coverage of Westminster are now exposed as a useless illusion. And, if so, politics and political journalism face a crisis of purpose and confidence.

Some very worldly journalists and politicians will affect surprise at our surprise. In this brutal view, everyone knows that the public side of politics is a game, in which players use euphemism, omission and sometimes plain invention in order to avoid saying anything that might harm their continuation in office. Jeremy Paxman's increasingly incredulous face-pulls are an attempt to signal the existence of this artifice.

To some extent, such conventions of pretence are necessary. An election is a form of theatre, and drama demands suspension of disbelief. For example, for the process to work, all the main parties must continue to maintain the possibility of victory, whatever the evidence of opinion polls.

That particular deception was justified by the recent election: the Lib Dems, whose predictions of forming a government have always seemed an absolute hoot, did take power, while Labour, which looked doomed (and surely would have been if Mandelson's book had come out in March), came very close to keeping the "mafioso" (as Mandy says Tony called him) in No 10. Equally, David Cameron and George Osborne might argue that, had they been candid about the scale of public cuts they had in mind, they would not now be in a position to make them.

But there's a difference between tactical opacity and open falsehood. The story now emerging of what happened in Downing Street raises deep concerns for the audience offered for so long a quite opposite tale. An electorate already deeply cynical about politicians will now feel even more entitled to discount any interview in which a member of the coalition government insists on its solidity. Interviewers would be justified in barracking ministerial pleas for belief and calm with cries of "that's not what you'll be saying in your memoirs in 10 years!"

In the same way that news programmes warn of the presence of flash photography in reports, should Today and Newsnight advise before the big set-pieces that the minister may be trying to distract you with dazzling imagination?

There is, fittingly, a third way of looking at Mandelson's belated admission that, whether or not he was a villain, his media appearances were largely a pantomime. In this reading, the truth of any political events is elusive and subject to nuance and self-delusion. For instance, The Third Man recounts Blair continuing to deny to Mandelson that he agreed a resignation date at Admiralty House, even when Brown and Prescott are insisting that he did. Only "much later", as Mandelson puts it, did the prime minister admit he had indeed offered to leave before the 2005 poll.

So, if those most involved are lying to themselves and each other, it may be inevitable that the central characters will struggle to get the story straight on the airwaves. And no individual has the whole picture. Even now, the editors of Blair's impending autobiography will be agonising over whether his volume should be altered to match or answer the Mandy narrative. Perhaps the ex-premier's memoirs will add a third version to the two quite different views that Mandelson and Campbell give of some events.

Yet, even allowing for the slipperiness of political history, The Third Man will have a long-term effect on the psychology of the creators and consumers of political reporting. Journalism accepts that it is only a first draft but it's deeply damaging for that draft to be exposed as so fictional. In making voters feel like viewers of The Usual Suspects, Mandelson has cranked up the usual suspicion of politicians to toxic levels.